New Income Tax Act, 2025 replaces 1961 law from April 1, 2026
‘Tax year’ concept simplifies filing by ending assessment year confusion
Budget pushes shift to new tax regime with detailed, data-driven ITRs
Digital-first compliance aims to reduce errors, scrutiny, and processing time
On April 1, 2026, the New Income Tax Act, 2025, will take effect in India. The new act will aim to simplify tax rules and make compliance easy for taxpayers. The new act will replace the Income Tax Act, 1961.
Let us take a look at how this will change the way you file your taxes and the compliance measures you follow.
Introduction Of Tax Year
One of the most significant changes under the new act is the introduction of the concept of ‘tax year’. This replaces the confusing ‘previous year’ and ‘assessment year’ concepts. Tax year refers to the 12-month period from April 1 to March 31. The income you earn during this period is assessed in the following year.
Encouraging Taxpayers To Move To The New Tax Regime
Over the last few years, we have seen that rules have been made to make the new tax regime more attractive. We can expect more push to move taxpayers to the new tax regime and a gradual phasing out of the old tax regime. It is supposed to make tax filing easier and more structured.
The new law and revised income tax return (ITR) forms require detailed disclosures for deductions such as housing rent allowance (HRA), home loan interest, and claims under Sections 80C, 80D, and others, along with reconciliation of AIS and Form 26AS data. This reflects the government’s move towards data-driven compliance and scrutiny on an exception basis,” says Basrur.
More Detailed ITR Forms
The revised ITR forms require detailed discourse for deductions, namely HRA, home loan interest, and also deductions under section 80C, 80D, and others. This shows that the government is moving towards data-driven compliance and reduced scrutiny only in exceptional cases.
Digital-First Compliance Approach
Going ahead, we can expect more of technology and artificial intelligence (AI) being used in the process of tax filing and assessment. This would mean less involvement from policyholders. This will likely improve accuracy, speed, and efficiency while minimizing human errors in tax compliance at the same time.
Smoother Tax Filing And Processing
More disclosures can be more time-consuming, but in the long run, it is aimed at reducing any mismatch and avoiding repeated correspondence with the tax department. Since most information will already be available through the annual information sheet (AIS) and pre-filled forms, tax filing will be a smoother experience for taxpayers.
